Should I choose S Corporation or regular Corporation?

Nell Dipiero: From your perspective the difference is that a regular corporation pays corporate income taxes and you pay taxes only on your salary and any dividends you receive from the corporation. An S-Corporation does not pay any federal income taxes (depending on the state you are in it may have to pay state income taxes) and you pay personal income taxes on your share of the profits of the corporation.On the surface it sounds like an S-Corporation is the way to go, but there is a catch and that is that it is quite possible for a corporation to be profitable but have negative or neutral cash flow. That means that you could wind up paying taxes on money you didn't receive from the corporation since the profits are passed through to you.In addition to Corporations you should also look into the cost and benefits of forming a Limited Liability Company.Hope this helpsJerry-the-bookkeeper...Show more

Providencia Serpe: No small business uses the C Corporation (regul! ar) as a form for their business. There is a double taxation issue with C Corps. The major benefit of an S Corporation is the opportunity for real cash savings of employment taxes for the owners. The S Corp is the ONLY form that has this benefit. LLC's do not. The S Corp requires a separate tax return, the 1120S. This can increase your accounting expense for the business which might negate the employment tax savings. I recommend you sit down with a CPA and get the complete story. It's too complicated to rely on Yahoo Answers. You do not want to screw this up. A partnership is easy to form. I've known people who each take their share of the partnership income and expenses and report them on their regular 1040 form, schedule C. No extra tax form to pay for (IRS Form 1065 is required for partnerships) It's not right, strictly speaking, but you get to exactly the same tax liability, so if ever audited, there's no underpayment of tax penalties. ...Show more